Kapiti Observer : November 10th 2011
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Monday-Friday 8am-5pm Saturday 8am-2pm • 74 Hokio Beach Road Levin CASH FOR CHRISTMAS Member of 3568310AJ • Carpet • Tiles • Wood • Vinyl STORE TO DOOR SERVICE Free Measure and Quote Showroom at: 1-3 Parata Street, Waikanae Phone 04 293 4133 4160026AA Complete video producピon soluピons from $250 incl. GST Phone 0800 000 110 04 298 3459 info@GreenLemon.co.nz www.GreenLemon.co.nz Borrowing plan on table By JOEL MAXWELL Councillors will decide today whether to join a borrowing agency that would see it liable for debt default by other councils. Under recommendations from staff, the council would become a shareholder in the Local Government Funding Agency using $100,000 rates surplus from the current financial year. Finance group manager Warwick Read said joining the Local Government Funding Agency scheme would save more than $300,000 in annual interest from mid-2015. The funding agency provides credit to councils with cash made from issuing bonds -- IOUs for investors paid back by a set date with interest. The council s savings are based on its forecast debt, which is expected to reach $184 million by mid-2016. New legislation is needed to create the agency, which would be a limited liability company with councils and the Crown as shareholders. Once established, it would aim to get a triple-A credit rating, it would be tax exempt, exempt from having to pro- duce a prospectus and exempt from the Official Information Act. Nine councils, covering more than half of the nation s rates income, have committed to the fund which is expected to provide lower interest rates for councils. Under the scheme the coun- cil would be forced to stump up as a guarantor for the scheme, run by, and for, councils. Today the corporate busi- ness committee will consider four submissions on the pro- posal by the council to join the scheme. In his report to councillors Mr Read said the risk of default by one of the borrowing councils was extremely low. No local authority in New Zealand has defaulted on its loan obligation in the past. He said the agency would have a $1 billion line of credit provided by the Government to help with any short term problems. Mr Read said the lower borrowing costs provided by the agency over the long term would far outweigh the possible costs that would arise from a major default. The council originally planned to borrow the $100,000 for the shareholder subscription but now proposes to pay with the rates surplus from interest cost savings, Mr Read said. Maxed-out council can't lend a hand By JOEL MAXWELL The council is set to slam the door on loans for community groups as it faces maxing out its debt limit in the next few years. By 2015 the council will be very close to its maximum limit of 20 per cent debt to equity -- the ratio of borrowing to council-owned assets, finance group manager Warwick Read said in a report to councillors. Today council will vote on whether to delay considering community loans till next year as part of its three-yearly Long Term Plan review. Mr Read said based on the projections in the 2009 plan, which sets out the council s spending and borrowing over 10 years, the council has no capacity to borrow for comm- unity organisations. The council will guarantee loans up to $100,000 for community organisations -- a policy in place since 1995. In more recent times there has been some interest in borrowing from council as opposed to borrowing from banks or other financial institutions by community organisations, and as a result a review for the issue of whether council should have a policy for lending to comm- unity organisations needs to be considered, Mr Read said. However, Mr Read said till next year s plan process is completed the council won t know its capacity over the next 20 years to loan money to community groups. The move comes with the council s debt set to hit $115 million by mid-2012, and reach as high as $184m by mid-2016. In September the council earned an AA minus Standard & Poor s rating, which will open up cheaper credit and save $400,000 annually in debt costs. Kapiti now joins 10 of the country s 76 councils, inclu- ding Wellington and the Auck- land Supercity, that have enough debt to warrant seeking a credit rating. The rating is the same as Hamil- ton City Council and just below Auckland, Christchurch and Hutt City Councils. Councillors will decide today on recommendations that state the council, under its 2009 plan, is not in a pos- ition to provide community loans; and will wait till next year before deciding. JOIN US ONLINE, kapitiob- server.co.nz or facebook.com/ kapitiobserver.
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